Analysis HLIT
Harmonic's sales surge reaches beyond its two key customers
Buyers outside two major accounts supplied more than the entire increase from Q2. Bookings fell from Q2, even as sales rose.
Harmonic's Q3 revenue reached $148.8 million, more than $13 million above the top of the forecast it gave in August. The broadband equipment and software supplier also raised its annual outlook.
The surprise came with a change in its customer mix. Revenue from the two customers that serve the most subscribers fell from Q2, while sales to the rest of the market climbed sharply.
Other customers supplied the extra growth
Research by Ticker Byline shows that revenue outside those two accounts increased by $19.3 million from Q2. That more than covered the $4.0 million decline in the two accounts, leaving Harmonic with $15.4 million of additional sales overall.
The broader customer group generated 46% of revenue, up from 37% in Q2. Its sales more than doubled from a year earlier, reaching $68.7 million.
That reduces Harmonic's dependence on the spending schedules of two large customers. Those accounts still matter: they generated 54% of Q3 revenue, and their sales were up from a year earlier despite the sequential dip.
The sales beat reached profit too
Harmonic reported $26.2 million in operating profit from its continuing broadband business. That exceeded the $17 million to $22 million range it had forecast for Q3.
Adjusted operating profit was $33.0 million, above the earlier $23 million to $28 million range. The adjusted measure removes share-based compensation and selected other costs.
The company now expects annual revenue of $545 million to $555 million, compared with $505 million to $525 million in August.
Orders are not matching the pace of sales
New bookings were $105.9 million, below both Q2's $144.3 million and the latest quarter's sales. Combined backlog and deferred revenue fell to $534.0 million from $587.6 million in Q2.
Both measures were higher than a year earlier. Still, the quarterly decline makes new orders an important part of assessing whether the faster sales pace can continue.
Harmonic expects Q4 revenue of $141 million to $151 million. That range spans a modest decline or increase from the latest quarter.
The Harmonic company profile follows the customer mix, earlier forecasts, orders, cash flow and completed sale of its Video business.